Hi M,IMO, SNDE is at risk of Ch11 but I still think that is...

Hi M,

IMO, SNDE is at risk of Ch11 but I still think that is relatively low but highly dependent on the willingness of the Nataxis led syndicate to work with SNDE mgmt.

(a) The RBL BB debt appears "safe" ... from a loan perspective. They are senior secured and there is more than enough to repay that upon restructuring

(b) The 2L notes (the Nataxis led piece) looks like the problem to me .... the ratio of PDP/1P ratio isn't high enough to generate enough FCF to repay (or refinance on decent terms) in the present environment. (Much) Higher oil price solves that (I'm thinking $60+). Forget EM and breakeven at $30/BoE. That isn't going to get investor attention when you have big companies like EOG demonstrating 30% ATRoR at $30/Bbl.

(c) No "easy solution". The company is crying for more Equity capital ... but that is highly dilutive at this price ... like most here my remaining shares are around the $20 - $25 breakeven. If new equity were sold in the $2 - $2.50 range, new investors get 10 times the stock .... but that's the risk we take as equity investors. Trouble is right now if we issue 8M shares (double the issued amount) and raise $20M ... what does that do for us? Enough to D&C 3 wells .... which needs to be considered in light of what it would take for a drilling program to get us back on track. Plus what could you hedge at & for how long and what would that ATRoR be.

(d) SNDE could do something with monetizing some of its hedges ... drill a free carry well or two so to speak. That depends on curtailment and what we could hedge the resultant production at. I'm sure they have thought of that.

SNDE is in that melting pot of similar sized companies (LONE, PVAC, CPE, ESTE, ....) which in this new CV-19 world are to put it bluntly, not necessary.

What is going to happen to CHK's assets I wonder. The latest talk on that one is
(i) Roughly $900M in new debtor-in-possession (DIP) loan, plus "rolling up" some existing debt to bring total DIP financing to ~$2B. Total Debt in CHK is around $9B split about 30% senior secured, 25% 2L & 45% Unsecured
(ii) Seeking some form of equity infusion ... Mutual Fund company Franklin Resources already owns +/- 10% of shares
(iii) the subordinated debtors (again FR owns a bunch of debt too) would swap debt for equity.
(iv) and now what? removed $9B in Debt and put back $2B in debt and essentially changed (equity) ownership. OK the interest bill goes down a lot say $500M - $700M. New owners wouldn't be attached to the assets but would still look to recoup their original bond principle. It's going to be messy. CHK has a bunch of EFS assets (plenty out Central-West (McMullen, LaSalle & Dimmit and then in the East (Brazos Valley). We know Dimmit acreage doesn't fetch much ...